Thursday, February 13, 2014

killing ivan's cow

There is an old joke that goes something like this.

There were two farmers, Ivan and Mikhail, both equally poor.  One day, Ivan inherited a cow.

Ivan's life immediately improved.  The cow pulled his plow.  The cow gave milk.  The cow produced calves for meat.  Ivan's farm outpaced Mikhail's.

One night, starving and miserable, Mikhail drops to his knees and prays: “Oh, God,” he implores, “Ivan and I were always equal.  And now look at him -- rich.  God, please, make us equal once more.”

There is a sudden thunderclap, and suddenly Mikhail hears the Voice of God.  “Your prayers will be answered,” says the Lord. “You shall once more be equal.”

Mikhail practically screams with joy. “Great!” he exclaims. “You’re going to kill Ivan’s cow!”

I am one of those restaurant denizens much feared by my fellow patrons.

Being single and gregarious is a difficult combination.  I am like one of those lone wolves always in search of a new pack.

If you are foolish enough to sit near me at dinner in a restaurant, I will soon be ensconced in your conversation -- and, possibly, in your life.  A simple greeting will get the same result as giving a bit of liver to a street dog. 

Yesterday I was eating at one of my regular food bags in town when I noticed a fellow sitting by himself at the next table.  Mexican.  Middle class.  Nicely dressed -- in that "we're here to help you" sort of way.

My guess was correct.  After I politely (if that is possible) interrupted his dinner, he told me that he works for hacienda -- the Mexican tax man.  He was in town talking with businesses about the implementation of a new electronic income reporting system.

The details of the reporting system are not important.  The fact that the tax people are taking the tax law seriously is.

I have written about the government's goal to increase its take of GDP by 6% (pass the tax plate).  The strategy is two-pronged.  The first is to extend the VAT to new sales.  The biggest change for our little tourist town is the extension of VAT to restaurants -- at the rate of 16%. 

Businesses will either eat the increase through decreased wages or profits.  Or the amount will be added into the cost of meals.  Or a combination.  My money is on increased costs.

The second way to increase tax revenues is through enforcement.  The man from hacienda gave me an example.  There are plenty of houses in our little town that are rented out.  That is probably true of every beach town in the world.

Even though there has long been a requirement for landlords to pay taxes on any rental money they receive, there are plenty of scofflaws.  There are also people, like my current landlady, who are scrupulous in paying all required fees.  That makes me feel proud that my rental check is actually doing something to contribute to the infrastructure of my community.

Even though my dinner partner was not in town to find revenue-dodgers, he gave me an example how easy it is for the newly-computerized hacienda to check on people avoiding the revenuers. 

He asked me where I had lived since I arrived in Mexico.  That was easy.  I have only lived two places.  He said with the names, addresses, and dates I gave him, he could determine who owes taxes to the government over what period and for what amount.

He also verified what I had only heard as a rumor.  I knew that hacienda would go after back taxes, penalties, and interest.  But I had heard rumors about property of foreigners being seized and the foreigners deported.  Actually, I had heard of only one instance -- up north.  He verified the rumor was true, but the circumstances of that particular example were egregious.

Our local message board has been discussing the rental tax issue.  The big question is how will hacienda get the names of people who have paid rent, but the landlord has not paid the appropriate tax?

I now know.  Ivan's cow seems to be feeling a bit ill.

Note -- If you are interested in the obligations that apply to foreigners earning money in Mexico, you can find out more at the hacienda site.


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